The Fiscal Crisis and Public Problems In US Case Assignment

The Fiscal Crisis and Public Problems In US Case Assignment

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The Fiscal Crisis and Public Problems In US Case Assignment

practice it can ruin the health of a city by limiting the amount of money invested for future

needs.

Fiscal Crisis

The fiscal crisis of cities has two components. During the 1970s, many cities faced

budgetary shortfalls because of rising costs coupled with decreasing revenues caused

by the decline in manufacturing and the rapid deterioration of urban economies.

These cities were forced to resort to short-term borrowing to cover their costs. Compounding

the problem was the flight of middle-class families from the cities to the

suburbs (traveling on highways built with federal money to homes subsidized by federal

housing policies), taking with them potential tax revenue that the cities des –

perately needed. The lower-income and new immigrant communities in the cities

required relatively higher levels of health care, education programs, and housing services.

When New York and other cities appealed to higher levels of government for

financial relief, they were rebuked, and this precipitated the urban fiscal crisis. Cities

responded to this situation by cutting services and systematically laying off personnel.

New York City, for example, almost went bankrupt in 1976 and was placed in

the hands of a money management panel appointed by the state to bring expenditures

back in line with revenues and limit the amount of borrowing. As a result of

the changes caused by this fiscal crisis, New York is unable to offer a full range of services

to its residents. The closing of firehouses, reductions in the numbers of police

officers and the hours of policing, the shortening of library hours, and layoffs and

firings at city agencies are some of the austerity measures enacted in response to the

urban fiscal crisis.

In the 1980s, many cities, such as Cleveland, which had defaulted in 1978, and

New York, which was forced into austerity, regained their fiscal health. The banking

community renewed its faith in the obligations incurred by municipal governments.

Short-term borrowing was controlled, and many cities prospered. For a time, it appeared

that the urban fiscal crisis was resolved (Gottdiener, 1986). However, the problem

was simply transferred to higher levels of government. At present, many states face

a fiscal crisis; New York and California have been especially hard hit. These and other

states have had to cut back on budgets for social programs in education, health, and

other areas, with perceptible effects on the quality of life. Because state governments

can no longer aid cities, local jurisdictions must increase taxes or cut back services.

Hence, the effects of the state fiscal crisis have been especially troubling for local communities,

and there is no end in sight for the first decades of the twenty-first century.

The federal government has not been able to help, since it has acquired serious

debt problems of its own for the first time in U.S. history. In 1980 the federal deficit

was approximately $40 million, an unprecedented but still manageable number. During

the 1980s, it rose to more than $150 billion a year. The interest payments on this

massive debt made up 14 percent of gross national product (GNP), and the United

240 9 : M E T R O P O L I TA N P R O B L E M S

States became the world’s leading debtor nation. Although President Clinton made

deficit reduction of the federal budget a priority, little or no effort has been made to

restore either programs or funding cuts during the 1980s. In places such as New York

and California, governments at all levels are suffering cutbacks of services and programs

as a result of the fiscal crisis. The damaging effects of these cuts cannot be exaggerated.

In Los Angeles, the police department and the district attorney’s office blame

California’s Proposition 13, which froze property tax revenues, for cuts in social programs

that resulted in increased gang activity and led to Los Angeles becoming

known as the gang capital of the United States.

Now the national debt is beyond imagining at many trillions of dollars as a consequence

of President Obama’s “fiscal stimulation” policy, which aims to jump-start the

deep recession economy of 2009 through Keynesian measures of government spending.

All lower levels of government have been promised stimulation dollars from this

astounding accumulation of fiscal debt. As the fiscal crisis of cities has worked its way

up to the state level, California, in particular, has been hit so hard that it would have

declared bankruptcy if the massive and damaging cuts in social programs had not

been affected in 2008. Yet despite these measures, it still requires either massive help

or more massive cuts. As of July 2009, the Obama administration spending proposals

have not materialized to any extent, and although they are said to be “in the pipeline,”

all lower levels of government anxiously await financial relief.

In sum, declines in local government spending on public services can be catastrophic.

States as well as municipalities have been fighting fiscal crisis, and cuts—with

their damaging results—have become inevitable. One positive aspect of the current response

to our national economic crisis by the Obama administration is the promise

that critically needed money will be channeled to state and local governments. To

date, little of this deficit spending has trickled down to the local level, but there are indications

that it eventually will. In the meantime, large states, like California, remain

stressed and must continue to cut public resources in order to avoid the unprecedented

fiscal failure of bankruptcy. In fact, during the week of August 24, 2009, the

state of California ran a massive “garage sale,” where anyone could purchase government

equipment that was surplus or merely available for the event. The goal of this

sale was quite serious, namely to make as much money as possible by selling unwanted

items to the public in order to alleviate in a small way California’s astronomical fiscal

crisis and its need for draconian cuts in public services, employment, and programs.

S U M M A R Y

It often seems that each month brings new challenges to urban areas in the United

States. Part of the problem is that our society, with its ideology of privatism (see

Chapter 13), hangs its solutions of pressing social issues, like poverty, health care, and

affordable housing, on some variation of mixed private and public interventions.

There is no universal health care in our country, as there is in other Western developed

S U M M A R Y 241

societies. Our large demand for affordable housing, once dealt with inadequately by

public subsidization, was absorbed by profit-making capitalists in the 1990s as subprime

mortgage derivative investing and yielded cataclysmic results. Although some

violent crime has been reduced in our cities, the overall level remains abnormally high

compared to countries in Western Europe and Japan, and we seem to enjoy its media

representations because crime and law shows are so popular.

In this chapter we have seen that while many social problems are not typically “urban”

anymore, our metro regions play a role specific to their spatial attributes. Cities

concentrate people, so as a form of space, they also concentrate their problems. City

crime rates are higher than in the suburbs. There are more poor people and more concentrated

pockets of poverty and racial exclusion in central cities. Consequently, when

dealing with many social issues, cities remain important as places that need special

consideration from policy makers and municipal governments need resources from

higher levels of administration.

We have also seen in this chapter that when the current economic crisis hit, our

largest metro regions were affected by unemployment much more severely than

other places because of the industries located there. Yet economic downturns, like

the present housing crisis, have deep roots in our society’s inability to solve its basic

social dilemmas. Consequently, as we shall discuss in Chapter 13, public policy can

play an important role if it tackles the major issues, some of which, like health care

and adequate land-use planning, were resolved in favor of greater public power

scores of years ago by comparable countries in Western Europe.

K E Y C O N C E P T S

social disorganization

public vs. private intervention

racism

segregation and hypersegregation

poverty

unemployment

housing crisis

affordable housing

spatial effects of social problems

fiscal crisis

242 9 : M E T R O P O L I TA N P R O B L E M S

D I S C U S S I O N Q U E S T I O N S

What is social disorganization and how can it explain urban problems?

How can you compare the early Chicago School and the sociospatial approaches

to urban problems?

Why are racism and segregation problems?

Why is hypersegregation troubling and how does it relate to the case of Hurricane

Katrina?

What is the significance of the most recent figures on crime?

Why does the space of the city create more problems than the rest of the metro

region? Should this result justify an anti-urban attitude in choosing a place to live?

Why is unemployment especially worrisome today? How does it affect metro areas?

What is the link between the need for affordable housing and the current economic

crisis? Why hasn’t American society solved its affordable housing crisis?

What is meant by a fiscal crisis? What are the implications of a city fiscal crisis?

What happens when the fiscal crisis happens at the state level?

The Fiscal Crisis and Public Problems In US Case Assignment

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